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TheEffectsofEmbeddednessontheEntrepreneurialProcess

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Department of Management StudiesUniversity of Aberdeen

The Effects Of Embeddedness On TheEntrepreneurial Process

Sarah Jack & Alistair Anderson

Working Paper No. 3

November 2000

Sarah JackDepartment of Management Studies,

University of Aberdeen,Edward Wright Building, Old Aberdeen,

AB24 3QY.Tel +44 (0)1224 273445Fax +44 (0)1224 273843

E-Mail: s.l.jack@abdn.ac.uk

Alistair AndersonDepartment of Management Studies,

University of Aberdeen,Edward Wright Building, Old Aberdeen,

AB24 3QY.Tel +44 (0) 1224 273260Fax +44(0) 1224 273843

E-Mail: a.r.anderson@abdn.ac.uk

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Abstract

This paper uses Giddens’ theory of structuration to develop the conception of entrepreneurship asan embedded socio-economic process. The qualitative examination of the actions of ruralentrepreneurs finds that embeddedness plays a key role in shaping and sustaining business. Beingembedded in the social structure creates opportunity and improves performance. Embeddingenabled the entrepreneurs to use the specifics of the environment. Thus both recognition andrealisation of opportunity are conditioned by the entrepreneurs’ role in the social structure.

Acknowledgements

An earlier version of this paper was presented at the Ninth Annual Global EntrepreneurshipResearch Conference, New Orleans, April 1999. We would like to thank Professor AkihiroOkumura for his helpful critique of our paper and the reviewers of the Journal of Business Venturingand our colleagues. Also the Carnegie Trust for the Universities of Scotland who supported some ofthe research.

Note: This paper has been accepted for publication in Journal of Business Venturing

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Executive Summary

This paper argues that in order to understand entrepreneurship we need to move away from

considering the entrepreneur in isolation and look at the entrepreneurial process. Entrepreneurship is

not merely an economic process but draws from the social context which shapes and forms

entrepreneurial outcomes. Embedding is the mechanism whereby an entrepreneur becomes part of

the local structure. This enables entrepreneurs to draw upon and use resources. Indeed in some

instances being embedded actually created opportunities.

Giddens’ view of structuration is used as a theoretical framework to explore the link between the

entrepreneur (as agent) and the context (as structure). Applying structuration to the study of

entrepreneurship enables us to recognise how social structures affect and encourage entrepreneurial

activity, particularly in terms of resource availability or constraint. We narrow the concept of

structuration to the notion of social embeddedness to explore how entrepreneurs use structure in the

creation and operation of their businesses.

A qualitative methodology was indicated because our objective was to explore and understand the

relationship. Ethnographic techniques ere employed, including triangulation, to study seven

entrepreneurs in local context. Data collection was conducted over a three-year period. Open

interviews explored the cause and effect relationship of embeddedness and the entrepreneurial

process. Analysis of the data used the constant comparative method, looking for explanatory themes

from the respondent’s own account of their situation.

The research highlights that the entrepreneurial process is value gathering, but process cannot be

treated in the purely isolated economic sense. It is sustained by, and anchored in, the social context.

The entrepreneurs were all embedded in the local area. Although there was no common mechanism

for embedding and the entrepreneurs had become embedded in different ways, being embedded

was clearly important. Embedding enabled entrepreneurs to recognise and realise opportunities.

Embedding realised opportunities which “fitted” the specific needs of the local situation.

Embeddedness also created a contextual competitive advantage. Social embeddedness was found

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to be a process of becoming part of the structure. However, it is more than simply developing social

networks. Embeddedness involves: understanding the nature of the structure; enacting or re-enacting

this structure which forges new ties; and, maintaining both the link and the structure. As a process

this entailed developing credibility and acquiring knowledge of how business is conducted. In turn

this impacted on the entrepreneur’s activities and influenced the way in which their businesses were

established and managed.

The contribution of our research lies in its illustration of how entrepreneurs embed as a mechanism to

pursue and exploit commercial opportunities. Consequently it emphasises the social aspect of

entrepreneurship, in particular the existence of socio-economic roles. The research demonstrates

that opportunity recognition and realisation are conditioned by the dynamics of the entrepreneur and

the social structure. Social embeddedness enabled access to latent resources and resources

otherwise not available to the entrepreneur. Nonetheless, these opportunities were found to exist

within the structure but only became manifest by the action of entrepreneurial agency.

The implications of our research are that it demonstrates the need to understand and appreciate how

the social context influences and impacts upon entrepreneurial activity.

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Introduction

Embeddedness, identified as the nature, depth and extent of an individual’s ties into the environment,

has recently been commented upon as a configurating element of general business process

(Whittington, 1992; Uzzi, 1997; Dacin, Ventresca and Beal, 1999). On the premise that

entrepreneurship is the creation and extraction of value from an environment, being or becoming

embedded must impact upon the entrepreneurial process. This paper considers embeddedness in an

attempt to further our understanding of the entrepreneurial process. A qualitative approach

ethnographically explores the embedding of seven rural entrepreneurs. Giddens’ (1979; 1984) views

on structuration are used as a theoretical framework to explore the link between the entrepreneur

(as agent) and the social context (as structure).

The findings confirm that the productive information and resources gathered through being

embedded compensated for environmental constraints and facilitated the entrepreneurial process

(Chell and Baines, 2000). In detail we found that in some instances local knowledge provided a key

factor of profitability. We argue therefore that embedding provides a mechanism for bridging

structural holes in resources and for filling information gaps. Interestingly we also found that being

embedded actually creates opportunities. These opportunities exist within the local structure but only

become manifest by the action of embedded entrepreneurial agency. This seems important because

these opportunities were unlikely to be available to others not embedded. Entrepreneurial

embedding therefore creates a link between the economic and the social spheres. This social bond

enables entrepreneurs to more effectively exploit economic opportunity. The paper’s contribution

lies in its illustration of the importance of the social aspects of entrepreneurship, in particular the

influence and impact of social context, and the development of a model of embedding which may

have wider application.

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The Relationships Between Entrepreneurship, Structuration and Embeddedness

Entrepreneurship

The literature highlights the difficulty of defining the terms, entrepreneur and entrepreneurship

(Gartner, 1988; Carland et al, 1988; Bygrave and Hoffer, 1991; Johannisson and Sennesth, 1993;

Rosa and Bowes, 1993). Questions arise about the more traditional methods used to conceptualise

the entrepreneur (Chell, 1985) and problems about perceiving the entrepreneur as being a separate

and distinct entity (Gartner, 1985). These debates suggest that, if entrepreneurship is to be

understood, researchers need to direct attention from dealing with the individual in isolation and

examine the process involved in creating new ventures (Gartner, 1985; Bygrave, 1989; Hofer and

Bygrave, 1992; Sarasvathy, 1997).

As a process entrepreneurship has been described as complex; a contextual event and the outcome

of many influences (Gartner, 1988). Taking the view that entrepreneurship is a process presents the

dynamics of the individual and the context, (from which the business is drawn and of which the

business becomes part) (Gartner, 1985; Scott and Anderson, 1994; Solymossy, 1997). However, a

difficulty with studying context is that they vary; different situational and social variables interact and

affect the individual (Cooper and Dunkelberg, 1981; Aldrich, 1979; Gartner, 1985; Castrogiovanni,

1991 and 1996; Sutcliffe, 1994). Nevertheless, the process of entrepreneurship draws from both

the individual and the context (Anderson, 2000). According to Young (1998) economic actions

between actors do not occur in a vacuum but are conditioned by ongoing structures of social

relations. Young’s view is that the social context influences economic outcomes. This view is

supported by a number of other researchers. For example, Aldrich and Zimmer (1986) remarked

that entrepreneurship is embedded in a social context, channelled and facilitated, or constrained and

inhibited by people's position in a social network with the entrepreneur being dependent upon the

information and resources provided by social networks (Carsrud and Johnson, 1989). Johannisson

et al (1994b) illustrate how entrepreneurs build networks that blend business and social concerns

(Johannisson, 1995:226). Gibb and Ritchie (1981:193) argued that “entrepreneurship can be wholly

understood in terms of the different types of situations encountered, and the social groups to which

they relate”. Although entrepreneurship may be influenced, and even arise from within a social

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structure, a conceptual difficulty is locating the entrepreneurial actor in the structures of society, since

the foregoing has shown that entrepreneurs cannot be simply treated as isolated economic agents.

Structuration

Giddens’ (1984) theory of structuration is well established and offers an approach to deal with this

conceptual difficulty. Whilst little use of Giddens’ work on structuration has been made within the

field of entrepreneurship, his ideas have emerged in the area of management studies (Whittington,

1992; Dacin et al, 1999). Applying structuration to the study of entrepreneurship enables us to

recognise how social structures affect and encourage entrepreneurial activity, particularly in terms of

resource availability or restraint.

Giddens’ view of structuration deals with the duality of structure and agency. Giddens accords

structure a formative position in social action, but also recognises the agents’ freedom within the

structure, a freedom to modify the structure. Giddens (1984:2) argues, “in interpretative sociology

actions and meanings are accorded primacy in the explication of human conduct...for functionalism

and structuralism however, structure has primacy over action”. Giddens notes that both conceptions

are flawed since interpretative sociologies are founded on an imperialism of the subject whilst

functionalism and structuralism are founded on an imperialism of the social object, the

undersocialized and oversocialized entrepreneur respectively. He goes on to point out that human

social activities are recursive, that agents reproduce the conditions that make these actions possible.

Since social systems involve regularised relations of interdependence between individuals or groups

they can best be analysed as recurrent social practices. Social systems, the situated activities of

human objects, exist syntagmatically in the flow of time. Structures are necessarily the products of

systems and are characterised by the absence of a subject. Embedding mechanisms, however,

allows us to link structure and agency in a dynamic relationship. It is argued here that to understand

entrepreneurship we must take account of both structure and agency, we can then appreciate how

societal influences shape entrepreneurial agency and how agency redefine or develop structure.

In this paper we narrow the concept of structuration to the notion of embeddedness to explore how

entrepreneurs use structure in the creation and operation of their businesses. We are not testing

structuration, but using it as a theoretical approach to explore links between the entrepreneurial

agent and the structure. We are not attempting to develop a theory of social embeddedness but are

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exploring the nature of embeddedness to gain insight into the entrepreneurial process. This will allow

us to probe Staber’s (1998) perspective that social embeddedness is a variable, and its causes and

consequences are contingent on circumstances which may be highly space specific. Our objective is

to identify the types of transactions that occur between the entrepreneur and his/her social

environment (Long, 1977).

Entrepreneurship and Embeddedness

Uzzi (1997: 1) argued that research into embeddedness can help to advance understanding of how

social structure affects economic life. He referred to embeddedness as “a puzzle that, once

understood, can furnish tools for explicating not only organisational puzzles but market processes”

(Uzzi, 1997: 22). In principle the point about embeddedness is that actors are said to be embedded

in concrete, ongoing systems of social relations (Grannovetter, 1985). Grannovetter (1985) argued

that behaviour is so constrained by ongoing social relations that to construe them as independent is a

misunderstanding. As Carsrud and Johnson (1989) note, the new business development process is

strongly affected by social contacts or linkages which in fact form the patterns of social interaction.

Burt (1992) describes this as bridging “structural” holes.

Social embeddedness is relevant to entrepreneurship because it helps the entrepreneur identify social

resources, an essential step to founding organisations (Hansen, 1995). Furthermore, being

embedded within the social context means access to more support during the entrepreneurial

process but also a likelihood of increased entrepreneurial activity (Schell and Davig, 1981).

However, embeddedness can also act as a constraint. Uzzi (1997: 17) identified conditions when

embeddedness can be turned into a liability, for example: the unforeseeable exit of a core network

player; institutional forces rationalising markets; even over-embeddedness stifling economic action

when social aspects of exchange supersede economic imperatives.

If entrepreneurship is embedded in a social context, then it must involve and draw on society. These

factors may play a role in the way in which value is, and can be, extracted in terms of resource

availability, opportunity perception and shape the entrepreneurial event. The argument proposed

here is that when examining the entrepreneur (i.e. the individual/or “agent”) the context (i.e. the

“structure”) has to be taken into account, since the social whole is pre-eminent over its individual

parts (Cassell, 1993). Or to fit this into entrepreneurial terminology (Gartner, 1985), “who is the

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entrepreneur?”, is indeed the wrong question. Thus the extent to which the entrepreneur is socially

embedded and how he/she is embedded, (that is to say their congruence with the structure) will

affect their ability to draw on social and economic resources. This will impact upon the nature of the

entrepreneurial process and influence the entrepreneurial event.

However, whilst every process of action is a production of something new, at the same time all

action exists in continuity with the past, which supplies the means of its initiation (Cassell, 1993).

According to structuration theory, in order to enact a social practice, participants must draw on a set

of rules. These rules can also be seen to structure and to shape the practices they help organise.

Agents draw on rules in the enactment of actions, but the capacity to modify the rule is an ever-

present possibility. At each point of structural reproduction there is also the potential for change.

Hence our structural analysis should penetrate below the level of surface appearances to

comprehend both continuity and change. Again embedding mechanisms should provide the

conceptual tool to comprehend this dynamic.

The lack of a social theory of the entrepreneur has been recognised as inhibiting our understanding

of entrepreneurship (Sargut, 1999). However, from a synthesis of the literature we have produced

Figure 1 as a way of conceptualising the relationship between the entrepreneur and social structure,

using structuration as our theoretical orientation and embeddedness as mechanism.

From the forgoing it appears that embedding is important for entrepreneurs, but that the mechanisms

and nature of embedding are under researched. In consequence this research is concerned with the

questions, what is the nature of social embeddedness and how does it effect the entrepreneurial

process?

Methodology

The Context

Due to the complexities of the relationship between entrepreneurship, structuration and

embeddedness, highlighted in Figure 1, this paper concentrates specifically on one particular context,

the rural, to identify contingent variables. Although rural businesses have been studied (for example

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Blackburn and Curran, 1993; Keeble, Tyler, Brown and Lewis, 1992), few have considered the

social aspects. A benefit of using rurality as context is that social process is easier to observe and

social influence is likely to be more transparent (Anderson and Jack, 2000). To paraphrase Koestler

(1964) the smallness of the area should have made it easy to survey trends which in other places

appear confused and diluted by size. The particular rural context selected was the Highlands of

Scotland, where an estimated two thousand new businesses were created between 1997 and 1998

(Highlands and Islands Enterprise, 1998).

Methods Adopted

Using a qualitative ethnographic approach (Morgan and Smircich, 1980) for data collection, seven

established entrepreneurs were purposefully selected from remote rural areas (see Table 1 for

background details). A qualitative approach was used because we were dealing with soft issues

which are not amenable to quantification, searching for the meanings which lie behind actions

(Hammersley, 1992). Further, our objectives were related to understanding, rather than measuring

(Oinas, 1999). The data collection was conducted over a three-year period, with some respondents

being interviewed twice, and others several times. The interviews varied in duration from a couple of

hours to many hours, whilst the direction and length of interviews was determined by the form of the

emerging data. Ethnographic techniques of open interviews were employed to explore the cause and

effect relationship of embeddedness and the entrepreneurial process. We also gathered rich

information about the history and background of the entrepreneur and the firm from non-

entrepreneurial sources (Denzin, 1979). This material represented a resource for comparison with,

and triangulation of, the emerging research themes. We felt that if we could reach an understanding

of the “how” question, analysis would allow us to address the broader theoretical issues.

The analysis of the data explored themes in the responses of entrepreneur using the constant

comparative method (Silverman, 2000) and analytic induction (Glaser and Strauss, 1967). Whilst

the entrepreneurs are not representative of the entrepreneurial universe, they do provide useful data

on embedding. The methodological techniques provided sufficient depth of data to allow a

meaningful analysis of the entrepreneurial process in context, to explore embeddedness and gain an

in-depth understanding of the role of each respondent. It also established the level of embedding for

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each respondent and allowed us to compare this with perceptions of the local community. Quotes

from the data are used to provide valuable supplements, to add voice to the text and help categorise

the data (Wolcott, 1990). We also attempt to link the practices with the background of the

respondents, inductively, and demonstrate veracity by telling a convincing story (Steyaert and

Bouwen, 1997).

Our approach is justifiable on a number of counts; our concern for validity and reliability aided the

development of analytic insights (Wiseman, 1979). This reflects Chandler and Hanks (1994)

suggestion that longitudinal and qualitative studies are useful methods to explore the way resource

capabilities are developed and environmental opportunities are identified. Dacin et al (1999:3)

referred to embeddedness research as being characterised by taking on really rich empirical contexts

and by getting “dirty” hands (Hirsh, Michaels and Friedman, 1990), in qualitative work you try to

make sense out of the social world of the people studied by attempting to reconstruct their view of

their world (Wiseman, 1979). We recognise these research techniques have some inherent

limitations. The study area was restricted, the small number of study firms and the methodology

employed inhibit generalisability (Larson, 1992; Chandler and Hanks, 1994). However, the value of

the research design lies in its capacity to provide insights, rich detail and thick description (Geertz,

1973) to produce a grounded model which can generate hypotheses for further testing (Larson,

1992).

Discussion

The Entrepreneurs in Social Context

Table 1 describes the entrepreneurs, their business and the social context. It shows that the

businesses, previous experience, length of time in the local area and connections varied amongst the

entrepreneurs. Although (Storey, 1994) suggests that entrepreneurs tend to start-up businesses in

the same industry in which they had experience, for our respondents, previous employment was not

necessarily related to their own venture. Nevertheless, previous employment provided background

knowledge, experience of working in a business and initial contacts. For instance, Anne had no

direct experience of the fashion trade, (except as a customer) but general experience had made her

acutely aware of the importance of marketing and customer relations.

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Respondents had varying degrees of familiarity with the rural environment. Significantly, none of the

respondents wanted to move from the area, instead their experiences had led to each respondent

locating their business in the rural. In spite of the structural limitations associated with rural business

locations (O’Farrell and Hitchens, 1988; Townroe and Mallalieu, 1993) for these respondents the

“rural” was an attraction. So, locational choice appears to contradict the rationale of profit

maximisation, but may represent an optimisation of all benefits. The table also demonstrates diversity

of entrepreneurial motivations. Nonetheless, it is clear that all respondents had chosen to develop

strong bonds to the local context. Furthermore, these bonds had influenced the entrepreneur’s

decision to establish a business. The later section attempts to develop this aspect by demonstrating

how each entrepreneur recognised the opportunity, describing its viability and their personal

perspectives of entrepreneurship.

Entrepreneurial Process; Recognition, Viability and Perspectives

Although each business was different and involved a variety of issues and risks, what is clear from

Table 2 is that the “local”, at some level, was important to the entrepreneurial activity. Moreover the

entrepreneurs attributed local factors to their success. This took the form of the local providing the

inspiration for the venture (Jane) “a lot of people were puzzled as to why we moved up. .... it’s

amazing, you see the Northern lights......it’s just brilliant and I wouldn’t want to live

anywhere else........sometimes I wonder if we struggle with the business just so that we can

stay here. Living up here is the most important thing.....I wouldn’t have wanted to set the

business up anywhere else”. The local also provided support. (Peter)“In a rural area you have

the advantage that, with no disrespect, you get a better class of citizens. I always find people

brought up in the country are something special and very dependable, very loyal. The stories I

have heard about the Central Belt are absolutely horrid...horrific.....We employ a lot of

people from the local area. They’re very dependable and loyal”. These factors clearly impacted

upon the motivation to build a local business. The entrepreneurs could all have worked and lived

elsewhere, but personal and professional motives influenced their locational decisions. Keeble

(1993) refers to the quality of life being important to people who live in rural areas. For each

entrepreneur, moving away from the area was an unattractive alternative. Perhaps more interestingly,

the entrepreneurs all had recognised that there was an opportunity within the local area and used the

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local environment. This supports the views of Smallbone et al (1993) who point out that opportunity

recognition arises from within rural areas rather than outside. However, the activities also provided

something of real benefit to the local community, which highlights reciprocity. The attraction of the

local environment was not just about producing a local living but also about adding to the local.

A further feature highlighted in table 2 is the variation of markets served. Ian, Anne, Jane and Peter’s

businesses serve markets beyond the local area. John is gradually expanding beyond the local area

as his reputation grows and expands. The nature of Fiona’s product means that she specifically deals

with the local market. However, such is demand that Fiona finds it difficult to keep up with local

requirements. George’s reputation has grown through local customers and tourists. Ian explained

“it’s just a small local business that initially was very much based around the main town but

now we operate in a 50 mile radius”. So, although each business was initially established to serve

the local market over time markets have expanded beyond the immediate local area. This seems to

support the notion of embedding as process over time.

Table 2 also highlights the respondents’ personal perspectives of entrepreneurship. Although the

views of the entrepreneurs illustrated in table 2 may not be untypical of entrepreneurs in general,

what is interesting is that several indicated that entrepreneurship would provide security for the

family, despite the risks associated with such activity. These points highlight how entrepreneurial

perceptions of risk and uncertainty are moderated by self-confidence. The perspectives also

demonstrate that risk assessment is subjective. George’s venture was extremely risky since the

business had no established customers or trading record, apart from the bankruptcy of the previous

owner! The hotel had been closed for almost a year and was in a poor state of repair. However, for

George becoming his own boss reduced the uncertainty, “I didn’t see it as risky, I knew this

place would do well, it was just a matter of pulling it all together......the opportunity we had

been waiting for......to build a secure future for our family.” George saw entrepreneurship as

providing security for his family and guaranteeing long-term employment; he was in control. Peter’s

venture was also risky because it involved construction in a small and remote area. Yet, Peter’s

interpretation of the venture was reduced uncertainty because he knew the area and the industry.

Anne’s venture involved substantial capital for stock. With the financial support of her family she

decided to purchase premises, “it’s an investment of our time and effort but its for ourselves

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and the family isn’t it?” Ian had initial contacts and contracts with the local council, but they were

almost complete and new business had to be gained to survive. Ian was fully aware of this but

“knew” the customer base was increasing and could continue to do so. He was aware of potential

but knew this would rely on his skills. Entrepreneurship provided Ian with flexibility, but at the same

time this flexibility became a disadvantage. Although he could decide when he wanted to take time

off, he worked during evenings and at week-ends to achieve this. Ian’s view was “at the end of the

day the buck stops here”. Fiona and Jane saw establishing their own businesses as the only

possible route to autonomy. (Jane) “There was no choice. It was the only thing we wanted to

do” Although their ventures required limited external finance, they had to ensure an immediate

market.

Thus for the entrepreneurs location provided advantages rather than disadvantages. However, these

were not conventional economic advantages but were more to do with the social aspects of the

area, for example they knew the area, were known and had local contacts to support their activities.

The ways in which viability was produced involved social factors and embeddedness. In a word

their businesses were embedded in the locale. They drew value from the local structure and in doing

so added to the structure.

Embeddedness and the Process of Embedding

All the entrepreneurs were embedded within the local context as Table 3 illustrates. However, there

was no clear pattern to the actions which resulted in embedding. Embeddedness had been achieved

in different ways and had different implications for the business and the way it was operated. George

and Anne were known through their family ties; they both had experience and knew the area, which

provided them with intimate knowledge; they had established connections and could call on people.

George’s in-laws were familiar with the hotel trade and could be relied on for support. Anne’s family

were unfamiliar with the fashion industry but had extensive business knowledge; experience and

acumen; were well regarded within the local community and provided both financial and morale

support. Anne’s embedding actions include holding fund raising fashion shows for the local area,

loyalty cards for local shoppers and keeping her customers up-to-date with new stock. Thus

customers felt that Anne was genuinely interested in them as individuals.

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Ian and John’s situations are particularly interesting. They are not local and yet sought to embed

themselves within the social context in different ways. Ian described how people tend to belong to

one club or the other; they socialise in the same areas in which they work and live, and frequently

with the same people. A quote from Ian helps to clarify this, “I came home in a taxi with someone

with whom I do business on Saturday night because we both happened to be at a wedding.

But the wedding happened to be the wedding of the son of another local who we both have to

contact through our work. We were both at his daughter’s wedding as well, but he’s just a

guy I work with and got to know through work and through Round Table we just happened

to be at his wedding so you’ll mix your social and your work very much that way”.

The Company which originally employed Ian had suggested that he joined various local clubs and

offered to pay his fees. However, he said he would be joining these clubs anyway, and felt he knew

enough about the area to realise that it was important to be seen to pay his own fees. These clubs

provided Ian with a way to become embedded at both a social and a professional level. Yet,

according to Ian, he has never joined anything to develop a business association. He joined because

he was interested in pursuing the social activity. Nevertheless, he does say that “you will develop a

business association because you develop a rapport with people and they get to know you as

an individual and on a personal level”. Ian argued that if you join these clubs purely to gain

business contacts, this would simply not work in the local area. Ian insists that the relationships he

developed were not fostered to gain information. He described how within a small rural community

everyone tends to know everyone else. “There is a way of doing business locally which involves

being fair, not forcing yourself onto someone else and not making their acquaintance purely

for the sake of generating business contacts.” Business is conducted very differently and on a

personal basis. This indicates that for Ian embedding is not “extractive”, i.e. mining the local context

for connections. It seems to be a reciprocal process of becoming accepted and also learning about

and accepting the local “rules”.

Similarly, John is not local but he became embedded in a different way to Ian. Initially this was

through a local mentor who was well known and highly respected. He took John under his wing and

encouraged people to contact John, because the locals trusted his judgement they did so. This

helped John to become better known and to develop a customer base. John also married a local.

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However, John’s personality and demeanour have also been important. He is a likeable chap and

has always done his best to get on with people by participating in village events. Clearly the local

community is important to John, “the people in the village have been a lot more supportive than

ever I thought they would have been.......they’ve made the business grow and turned it into

what it is more than I have really. I may be in the background stirring things up but certainly

they are the main people that it’s all down to really.......The location, that’s why I wanted to

start here, it was needed”.

Peter has always lived in the area. This has helped him to understand and appreciate the local

context. Peter has become both well respected and regarded as an individual, as a businessman and

as an employer. Peter discussed the ways he discovers what is happening at a local level. He

commented on how “we have an underground in the rural area .... if there’s something

happening someone will know about it. We have contacts in most places and most

departments, which obviously I can’t name.” Clearly this “underground” is important to Peter

and informs his business activities. Peter also uses the knowledge of his staff and their local social

relations, “to be quite honest I find advertising (for staff) a waste of time, we do it through

personal contacts. All I have got to do is go to the factory and say to Alan or Martin, I’m

needing a couple of guys. They’ll come back to me in a few days. That’s the way we’ve done

it and it always works. But we don’t pinch staff from other local employers”. Thus Peter is

also aware of how his staff can help him to realise opportunities. Moreover, even if staff do come

from another local business Peter himself is not actually being seen to “pinch” them. Thus he retains

his reputation and respect at a professional and an individual level.

Interpretation and Analysis

Entrepreneurship and the Social Context

Although there was no common mechanism for embedding and the entrepreneurs had become

embedded in different ways, being embedded was clearly important. The results of embedding

actions involved gaining and acquiring local knowledge, credibility and resources. The locals knew

the individuals, often referring to them on first name terms. Through being embedded the

entrepreneurs seemed to take pride in either being local or becoming local and all wanted to have a

20

close local relationship. However, this seemed to be at a personal level rather than through business,

each wanted to be recognised as an individual. This reflected onto their businesses which were

personally associated with the entrepreneurs. Previous research has shown that an entrepreneurial

motivation is the production of prestige (Anderson and Jack, 2000). However, prestige from the

view of the individual entrepreneur can be relatively superficial. In contrast being embedded, as the

triangulating comments in table 3 indicate, suggests a more profound respect for the individual in

context. Through embeddedness the entrepreneurs also appreciated how business was conducted in

the area, the local rules and opportunities for business activity. John and Ian, being outsiders,

appreciated this more sharply. They had recognised the need to become embedded for two

reasons. Firstly, they realised that business was conducted in a specific way and that embedding

would provide a better understanding of these local rules. Secondly, they recognised the need for

the locals to get to know them as individuals as a precursor to business links.

Each individual chose to become an entrepreneur by recognising an opportunity within the local

context. Within the entrepreneurial process, the context and the local environment played an

important role. Whilst this does not necessarily differentiate these entrepreneurs from those in other

environments, it is apparent that none of the entrepreneurs wanted to simply earn a living from

rurality but offered some sort of trade-off and local benefit. They were all providing something which

they considered the local community needed and would be beneficial; but equally they drew upon

the locale to support their business. This goes beyond “normal” business activity. Hence structure

and agency appear to be in a dynamic relationship.

Each felt that they knew, or could develop knowledge about, the local area. This helped them to

understand the market place and its requirements, the labour market and business opportunities.

They knew both the limitations of available resources and the local potential. This knowledge

empowered them with the confidence that the business would work. So being embedded had

specific benefits for the business operation. Two further components which the research highlights in

the process of embedding are knowledge and trust: knowledge about the entrepreneur and trust in

them, coupled with knowledge about the local context.

21

Embeddedness and its Effect on Entrepreneurial Activities

Being embedded within the social structure of the area provided the entrepreneurs with intimate

knowledge, contacts, sources of advice, resources, information and support. This indicates that by

being embedded it was easier to recognise and understand what was required and available. These

perceptions, in part developed by the structure, of the entrepreneur are important in recognising the

business opportunity and potential. The entrepreneurs appeared to have a vision which contributed

to their success, they convinced others because they knew their venture would work. But they could

only do so by being contextually aware through embeddedness.

The Embedding Process

We propose the following model as a way of conceptualising the relationship between the

entrepreneur, structuration and embeddedness. This model builds upon that presented in Figure 1

but illustrates how our findings can help to understand the relationship. Furthermore, it views this

relationship as a dynamic structure and illustrates the interactive context in which entrepreneurship

occurs.

Figure 2 highlights that our research has illustrated that identifying entrepreneurial opportunities

occurs within a specific context. However, to identify the opportunity and realise its potential, the

entrepreneur needs to know and understand the context. To do so the entrepreneur has to be

socially embedded. Social embeddedness enables the entrepreneur to understand the specifics of

the local structure and to achieve the entrepreneurial outcome. These actions form part of the

entrepreneurial process because the entrepreneur is embedded in the context (i.e. it is the structure

which shapes the context). In turn the structure is changed by the entrepreneur which forms the raw

material for the next round of entrepreneurial activity.

Value Extraction and Value Production

The analysis shows that value is both extracted and produced, and that this is facilitated through the

entrepreneurs’ embeddedness. Value is extracted through the way the entrepreneur draws on the

environment in establishing and developing the venture, but value is also produced by the

22

establishment of the venture and grounded in its contribution to the local. Hence we see a circular

process of embeddedness; drawing from (the local environment): giving to (the local environment).

Conclusion

Examining the entrepreneur within the context of rurality illustrates that embeddedness is an

important factor of the entrepreneurial process. The entrepreneurs were all embedded in the local

and this influenced the way in which their businesses were established and managed. The

entrepreneurial process is ongoing and reflects changes in the local context. The entrepreneurial

process is about value gathering, but this research highlights that it cannot be treated in the purely

economic sense. It needs to be sustained by, and anchored in, the social context, particularly the

local environment. However, whilst our research highlights the advantages of social embeddedness,

it could also be a disadvantage. Embeddedness involves relationships, but relationships can be

damaging or creative (Johannisson, 1987). For example, failing to conform to expectations or

implicit rules may sour relationships and become hindrances to business operations. Therefore, the

social context does not always contribute to the venture, social and moral obligations can also

constrain.

All seven entrepreneurs illustrate examples of local opportunities which “fitted” the specific needs of

the local situation. In these instances they recognised the need (opportunity) through being

embedded which in turn helped them to develop a contextual competitive advantage. For the

entrepreneurs the appeal of establishing their business was influenced by social factors; they had

family in the area, their children had made good friends, they liked the way of life and the social side.

The opportunities were contextual in that each required knowledge of the structure of the local

context. Embeddedness facilitated this process and helped to cement the entrepreneurs into the local

environment by providing a way of understanding the structure. Thus they were able and enabled to

recognise and realise opportunities.

Embeddedness is a process of becoming part of the structure. However, it means more than simply

developing social networks, although it is through these that social endorsement and acceptance

occurs. Embeddedness is a process of becoming part of the structure. The embedding process is:

23

• understanding the nature of the structure

• enacting or re-enacting this structure (Johannisson, 1988 and Weick, 1969 refer to this as

“environment”) which forges new ties

• maintaining both the link and the structure

The evidence suggests that the level of embeddedness in the local environment is determined by the

networks, ties and relationships of the entrepreneur. Thus social networks provide the mechanism

for becoming embedded. Embedding is a two way process of gaining credibility, knowledge and

experience. Reciprocity provided the entrepreneurs with knowledge, contacts and resources but this

was only be achieved when the locals knew the entrepreneurs.

A theoretical construct of structuration is that the future is anchored in the past. That is, the past sets

the conditions for the future but not deterministically. Thus in the entrepreneurial process the local

environment acts as a socio-economic context whereby social relationships impact upon economic

outcomes. The process of embedding is about establishing those social relationships which enable

the entrepreneur to become part of the local structure. Embedding is a way of joining the structure,

by joining the structure one enacts it. Johannisson et al (1984) referred to how the personal network

can help the entrepreneur to operationalise a context and its own unique logic - i.e. the values,

attitudes and action rationales which are taken for granted by the members as vehicles to success -

incomprehensible to outsiders. In Weick’s (1969) terms through understanding this logic the

entrepreneur enacts the environment. In our study being socially embedded enabled the entrepreneur

to understand the local structure and also to become a part of it. Thus the entrepreneurs were

presented with a unique competitive advantage: social embeddedness allowed them to become “a

part” of the structure”. As a consequence the structure becomes enabling and is thus a dynamic

relationship. Structure does not empower but it can be characterised as a milieu of opportunities.

We have shown how opportunity recognition and opportunity realisation are conditioned by the

dynamics of the entrepreneur and the social structure. Being socially embedded enables access to

latent resources and resources otherwise not available to the individual entrepreneur. However, this

study shows that in addition to entrepreneurial facilitation, being embedded creates opportunities.

The opportunities exist within the structure and only become manifest by the action of

entrepreneurial agency. Thus we see how Gidden’s notion of structuration provides a lucid account

of entrepreneurial action and structure. Through embeddedness, entrepreneurial action converts

24

“limited” resources into a “rich environment”. Conversely it can also produce constraints (Anderson

and Jack, 2000).

The contribution of our research lies in its illustration of how entrepreneurs embed as a way to

pursue and exploit commercial opportunities. The findings from this study support the view of Dacin

et al (1999: 38) that “economic rational behaviour is not only grounded in wider social structures

and meaning systems but also generative of change and variation within these”. We would also agree

with Uzzi (1997) that we need to understand the influence and impact of social relationships and

embeddedness on economic activity. Our findings also illustrate the accuracy of Burt’s (1992)

structural holes thesis. The entrepreneurial application of embedding has been shown to provide the

mechanism for bridging these structural holes.

Implications

Whilst this research has demonstrated that entrepreneurship is embedded within a social context,

further research is needed to test the model in other contexts. An implication for practitioners is the

importance of the social context. There are also a number of other areas for research: the role of

social capital as an embedding mechanism (Anderson and Jack, 2000); the extent to which

networks provide a mechanism for embedding; the nature of the entrepreneurs’ search for status

within the local environment; the impact of the constraints of embeddedness, particularly in terms of

failure. Our sampling procedure prevents us from proposing that the more embedded an

entrepreneur becomes the greater the number of opportunities which will arise, but the strengths of

the links of our respondents certainly suggest such a correlation. Clearly this is worth exploring in

future research.

25

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Figure 1: Agency and Structure

31

32

Table 1: The Entrepreneurs in Social Context

Business

and Year

Established

Background and

Experience Prior to

Start-up

Locational

Relationship

Spouse’s

Origin

Spouse’s

Participation

Reason for

Entrepreneurship in the

Rural Area

Ian Professional

service -

1981

12 years in

professional services.

Established rural

branch office for

employers which he

then purchased.

Rural incomer

1973 (age 28) but

intended to return

to city

Moved to the

rural with

husband, Ian

Housewife but

with very active

local

connections

Professional and ambitious,

offered partnership in city but

chose rurality because of

lifestyle and perceived

opportunity

Anne Clothes retail

outlets - 1987

Marketing qualification

and experience in an

unrelated industry.

Has always lived in

rural

Also local Owns technical

business

Wanted to establish business

and family (including business

partner) owned several

businesses within the area,

providing local business

knowledge

George Hotel - 1993 5 years in hotel

industry

Rural incomer

1990 (age 22)

Established

local family

Partner in their

hotel

Wanted to stay in area and

family familiar with trade;

security

33

Jane Glass blowing

studio - 1994

Formal qualifications.

Experience of craft

industry. 2 years in

glass blowing studio.

Family moved to

area 1974 (Jane

age 4). Left for

university but

wanted to return.

Moved to the

rural when Jane

returned

Full partner in

business

Wanted to establish business

in the area which was seen to

be inspirational for design and

creativity

John Electrical

contracting

and retailing -

1993

14 years as an

electrician, employed

by an electrical

contractor

Rural incomer

1987 (age 30)

Established

local

Works in

business

Chose to stay in the rural area

due to lifestyle and spouse’s

wishes

Peter Construction

company -

1977

Employed by the

original construction

company for 15 years

as administrator

Born and brought

up locally

Also local Housewife Wanted to stay in the local

area and saw potential for

growth of activity

Fiona Fruit business

- 1993

Qualifications and

experience in fashion

and making clothes

Family moved to

area 1961 (Fiona

age 1). Left to gain

qualifications but

anxious to return.

From

established

local family

Sometimes

works in

business but also

has other

business

interests

Tried a number of ventures to

allow her to live locally

34

Table 2: Entrepreneurial Process: Recognition, Viability and Perspectives

Opportunity

Recognition

Location and Viability Markets Advantages Disadvantages

Ian Original business

closing but great

potential outside

existing contracts

Minimal capital investment;

liked the area, people liked

Ian, hence customer base

increased through reputation

Initially small but have

now developed in quality

and extent

He enjoys flexibility

and freedom in “doing

the job”

Flexibility also means

lack of structure and

an open-ended

commitment

Anne Recognition and the

realisation of local

market potential for a

quality outlet

Organic growth, family

support, intimate local

knowledge turned to

business advantage; business

partner provides support,

business acumen and

knowledge

Has expanded existing

outlet and developed

another

She and her family

would benefit directly

from her hard work

Does not enjoy

people management

and business

maximisation

George Saw potential for good

management

Application of new

marketing and management

Immediate area and

increasingly tourists

Control of own life,

security for family

Long hours away from

young family

Jane Was inspired by

physical environment

Unique creative skills which

were locally supported

60% trade UK and

international; 40% local

Satisfied her need for

autonomy and wish to

Remoteness for

technical support; she

35

and saw possibility of

using this in product

design

live locally dislikes managing

finance and the erratic

income

John Not really opportunity

originally but emerging

as he became

established

Developed reputation for

reliability and trustworthiness

by association with mentor

Customer pulled

expansion, business

changed in nature,

created retail outlet

Directly realises

benefits of his integrity

and effort

Overwhelming

demands on time

Peter Offered opportunity to

purchase shares in an

old established business

with good reputation

Specific rural area

opportunities, employees

and ability to find good staff

Joinery and construction

in local market;

manufacture and supply

of windows to United

Kingdom

Entrepreneurship

provides security for

his family; he controls

his own destiny

Saw no disadvantages

at all

Fiona The opportunity was

suggested to them

Based upon local

knowledge, local contacts;

location enhances product

Very local market She realised her

determination never to

work for anyone else

Managing volume of

work and hours

36

Table 3: Embeddedness and the Process of Embedding

Mechanism and Nature of

Embedding

Embedding Outcomes Implications for Business Comments from Local

People

Ian Range of social activities,

including joining clubs for

social reasons (not to overtly

develop contacts)

Understood and realised how

business was conducted -

cannot develop contacts

purely for the sake of business

Business conducted on a

face-to-face basis; no

advertising; unique

marketing opportunity

“does a good job. .... works

hard and long hours. .... can

be trusted”

Anne Family and being local,

enhanced by community

activities and good customer

relations; business benefits

the local community

People know her; people trust

her

Profitable business

expansion

“she’s doing really well for

herself. .... she lets me know

when she has something in.

She always knows what will

suit me”.

George Through marriage and by

getting to know other people

Strong sense of belonging with

intimate local knowledge;

customer loyalty

Knowledge of reliability and

creditworthiness;

local knowledge provided a

framework for information

“he’s a good lad. ..... did a

great job at Wendy’s

wedding”

Jane Established local, sharing General practical and morale Locals want to see the “they’re such a nice young

37

vision and ideas for the

community

support from community; seen

to promote natural beauty of

area

business do well because it

celebrates their place; locals

felt a vested interested

couple. .... deserve to do

well”

John Embedded through a

“mentor” but personalised

these ties

Business comes from word-

of-mouth; recognised how

business was conducted

Business growth; not price

sensitive; repeat and regular

business through word-of-

mouth

“he’s a nice guy. .... will

always help you out”

Peter Established local;

empowered local employees

Channels to new local

business;

understanding local business

context

Known for quality work and

fair employee practices;

because of quality and fair

employee practices is first

choice for potential

customers

“he’s a good man and really

fair. .... once a Jones man,

always a Jones man”

Fiona Maintaining local links; using

local labour

Product fits local market; seen

as the local supplier and

worthy of support

Majority of customers are

local; retains these

customers and adds new

customers on their

recommendation

“she’s always on the go but

always cheery .... you have

to get into the shop early to

get her fruit. It goes so

quickly”

38

Figure 2: The Structuration of Entrepreneurship: Structure and Agency in a Dynamic Relationship

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